The National Social Security Fund (NSSF) is seeking a consultant to review the adequacy of its contribution rates and develop a framework for periodic revisions, signalling possible future changes to mandatory pension deductions for Kenyan workers and employers.
The NSSF, which is now Kenya’s largest public pension scheme managing billions of shillings in retirement savings, is seeking an actuarial firm to assess and advise on periodical adjustments to membership contribution amounts.
Search for the consultant comes months after the latest increment in NSSF contribution rates in February to a maximum of Sh6, 480 from Sh200 per worker in 2022. It will rise further to a maximum of Sh8, 640 next year.
The higher payouts have coincided with a five-year period that has seen salary increases lag inflation or cost of living measure.
The NSSF did not indicate if the review of the contributions will lead to an increase or a cut.
‘In order to comply with the provisions of the Retirement Benefits Act and to enhance the quality of the operational, financial, investment and solvency management of NSSF, the Fund invites proposals from actuarial firms interested in providing consultancy for actuarial and investment advisory services to the Board of Trustees,’ the fund said in the tender document.
The selected firm will also be required to provide advisory support to the Board of Trustees on financial and operational matters, including strengthening the fund’s capacity to monitor appointed fund managers, custodians, and other investment service providers.
The consultancy will further be expected to advise on key areas such as the interest rate credited to members’ accounts, the management of reserve funds, and the review of the fund’s broader investment policies and strategic asset allocation decisions.
The request comes at a time Kenyan workers are facing rising statutory deductions, including the housing levy and contributions to the Social Health Authority, which have collectively reduced disposable incomes for many salaried employees.
The NSSF Act of 2013, which had faced years of legal challenges from employers over its impact on payroll costs and take-home pay, was eventually rolled out in stages, culminating in higher monthly deductions for employees earning above set thresholds.
Under the revised structure, monthly contributions rose from Sh200 per month under the old regime to a maximum of Sh6,480 for employees in higher income brackets of more than Sh100,000.
Actuarial reviews are central to pension governance and typically assess whether current contribution rates are sufficient to meet future benefit obligations.
These assessments take into account variables such as life expectancy, wage growth, inflation, and expected investment returns, and may ultimately inform recommendations to increase, reduce, or maintain contribution levels.
Consistent review of contribution rates, according to NSSF, is intended to ensure the fund remains financially sustainable while fulfilling its mandate of providing income security in retirement.
Proponents of the higher NSSF rates reckon that they stand to ease the growing old age poverty.
Old age poverty has significant social implications in a country where the traditional patterns of the young caring for the old are changing.
Analysts point out that the relatively low number of Kenyans saving for pension and the value of payouts at retirement have compelled many retirees or those approaching the legal retirement age of 60 to continue working.
Kenya also suffers from low pension coverage with more than 70 percent of Kenyans retiring without a pension, save for the less than sufficient payout from the NSSF.
The NSSF’s monthly contributions stood at Sh400, including the Sh200 matched by the employers, for years and the fund on average paid out less than Sh250,000 when a member retired.
Kenyans on average are living longer and the rank of the elderly poor is rising as the traditional social fabric – which consisted of a large extended family to fall back on in the rural areas – yields to the forces of rapid urbanisation and changing social and family trends.
This is what prompted the State to start a monthly stipend of Sh2,000 for those above 70 years to cushion them from old-age poverty.
The consultancy could also pave the way for more structured and periodic reviews of contribution rates in future, potentially reopening debate over the balance between strengthening retirement savings and protecting